As Jones Lang LaSalle works to close its $2 billion deal to acquire Holliday Fenoglio Fowler LLP, HFF Chief Executive Officer Mark Gibson said last week JLL's global platform and a culture that "best matched the culture of HFF" played key roles in its decision to hook up with its competitor.
The globalization of capital flows, growing power of institutional investors and consolidation of real estate services firms also prompted HFF to consider the possibility of a merger or acquisition, according to comments Gibson made during HFF's first-quarter earnings conference call held late last week. HFF included a transcript of the call in a prospectus filed with the U.S. Securities and Exchange Commission, which discloses information about business combinations.
Gibson's comments offer some of the first insight into HFF's reasons for joining forces with JLL, a move the parties somehow kept secret during more than five months of negotiations. JLL announced March 19 it had agreed to acquire Dallas-based HFF in a move JLL Chief Executive Officer Christian Ulbrich said at the time, "provides a unique opportunity to accelerate growth and establish JLL as a leading capital markets intermediary."
Stockholders of HFF, which recorded revenue of more than $650 million in 2018, will receive $24.63 in cash and 0.1505 shares of JLL common stock for each HFF share they own. "First and foremost, HFF shareholders will receive attractive value for their HFF shares, combining an immediate cash element with the opportunity to participate in the future success and high growth potential of the combined company," Gibson said during the call.
Gibson, who will become JLL's chief executive for capital markets in the Americas and co-chairman of its global capital markets board, also said approximately 50 key HFF personnel have "signed multi-year employment agreements in connection with the transaction." He did not identify them.
In explaining HFF's reasons for the merger, Gibson said the company long has stated it would be open to an opportunity with another company as long as it created a platform that would better serve its shareholders, employees and clients and "accelerate our strategic plan by a number of years," according to the transcript.
"Members of HFF senior management have met with a number of companies over the last several years, all of whom were highly successful businesses with excellent leadership," Gibson said during the call. "However, JLL was the only company that we concluded met the criteria listed above, and also provided a culture that best matched the culture of HFF."
As large financial institutions such as pension funds, endowments, family offices and sovereign wealth funds increase their allocations to commercial real estate, they are becoming more powerful in the industry, Gibson said. These large institutional investors typically seek out real estate firms that offer a full suite of services, he said in the conference call.
"Therefore, as we look five years or longer into the future, we believe it is important for an intermediary to provide a client with services that extend beyond capital markets activities," Gibson said.
Moreover, as the flow of capital into commercial real estate continues to expand internationally, intermediaries that can provide services to clients around the world have a distinct advantage over those that do not, Gibson said. "Importantly, a combination with JLL accelerates HFF’s strategic plans to open more overseas offices by at least five years," he said during the call.
JLL serves clients in more than 80 countries from nearly 300 corporate offices covering hundreds of markets around the globe.
As for markets in the United States, Gibson said the combination of producers from JLL and HFF is expected to accelerate growth in major markets including New York City, San Francisco, Los Angeles and Chicago.
And as HFF works to maintain its "competitive position" in the multifamily business, it sought "to have a strong relationship with Fannie Mae to complement our strong relationship with Freddie Mac," Gibson said. The transaction with JLL will help because Jones Lang LaSalle Multifamily LLC is one of Fannie Mae's Delegated Underwriting and Servicing (DUS) Lenders, and JLL possesses a U.S. Housing and Urban Development license, HFF said. "We believe these two sources of capital will be important to HFF clients and drive additional revenue for the ultimate benefit of shareholders," Gibson said during the conference call.
JLL expects to close on its acquisition of HFF in the third quarter.
Top Houston Retail Broker Leaves CBRE to Join National Competitor
A veteran 30-year Houston retail broker has left CBRE to join Cushman & Wakefield and lead the latter's retail division.
Eric Lestin, formerly a senior vice president at CBRE’s office in Houston, is now a managing director at the Houston office of Cushman & Wakefield, he confirmed to CoStar News. Lestin will lead the firm’s retail brokerage division.
During his time at CBRE, Lestin represented restaurants and retailers such as Peli Peli, Café Ginger, Piola and Island Grill. Lestin joined CBRE in 2014 after a lengthy stint at NewQuest Properties.
In other news, Cushman & Wakefield also recently hired Ryan Stevens as a managing director within the company's institutional capital markets group, where he will focus on Houston and Dallas. Stevens previously was the vice president of real estate acquisitions for Lionstone Investments. » Read More
TRI Commercial Nabs Veteran Broker in East Bay
Commercial real estate advisor Marilyn Hansen has joined TRI Commercial / CORFAC International in Walnut Creek, California, as a senior director.
With more than 30 years of experience in investment and leasing advisory, Hansen will primarily focus on retail and investment brokerage and strategic planning for clients.
Hansen joins TRI from Colliers International in the East Bay and before that was with Grubb & Ellis in California's Silicon Valley.
Chang Joins ASB from JBG
ASB Real Estate Investments has hired Christina Chang as a vice president and assistant portfolio manager of the company's Allegiance Fund, a $7.5 billion core investment vehicle.
Chang will work closely with senior portfolio management team at ASB in her new role.
As a vice president of residential asset management at JBG Smith, Chang oversaw a portfolio of multifamily and mixed-use assets. Before that, she was with Bucknell University’s endowment and in the investment banking divisions of Macquarie Capital and Lehman Brothers.